Friday Notes

Vendor Communication to me on Thanksgiving:

• "Hey Kevin, I hope you just demolished a turkey. Would you like to save $100 on one of our events?"

Vendor Communication to me on Thanksgiving:

• "I can design flyers that will increase your revenue by 2x to 3x."

I'm gonna be rich saving money on conferences while increasing revenues by 2x to 3x via the creation of a (checks notes) flyer.

Meanwhile, Macy's is busy trying to rehabilitate their reputation by having Jim Nantz say positive things in a "Nantz voice".

See the QR code there? Somebody has to analyze that thing tomorrow. 

Speaking of an omnichannel approach to selling.

Somewhere the Omnichannel Steering Committee (#OSC) is clinking a glass of champagne after overriding the digital marketing team on this ad. Lawyers, Omnichannel Management (who operate in a matrixed org structure, not reporting to anybody - just like the customer who doesn't report to anybody), and the Marketing Promotions Team can all agree that this is beautiful.

P.S.:  This recipe is bound to become part of your beloved family-based Thanksgiving Day tradition going forward.

Butter Corn

• One Bag of C&W Petite Yellow Sweet Corn (don't compromise here).
• One Stick of Tillamook Creamy Salted Butter.
• Place stick of butter at the bottom of a pan.
• Pour bag of frozen corn over the stick of butter.
• Heat on low heat, stirring occasionally, until mixture shows the slightest hint of becoming "bubbly" - then immediately pull from heat (to prevent corn from softening).
• Serve hot - I recommend not using a slotted spoon. Generously salt your serving should you not suffer from heart-related maladies. 

The Rehabilitation Campaign Began Yesterday

It took Retail Trade Journalists exactly one (1) day following the "Mistakes Were Made" event to act as an affiliate-PR department on behalf of Macy's. One (1) day.

In 2007, Macy's generated $26 billion in net sales. Last year Macy's generated $23 billion. If we adjust for inflation, that's likely between $15 and $17 billion in 2007 sales. In other words, Macy's doesn't know much about storytelling.

But a day after weaving a story that a lone gunman hid more than a hundred million in expenses, maybe they are getting good at storytelling?

P.S.: What is the point of this? It's obvious ... be careful who you trust. There's a reason Macy's is constantly referred to positively by trade journalists.

P.P.S.:  The unsubs I received following the Macy's announcement are hilarious. This is the breaking point for some of you? Seriously? You support retail fraud?

Oh, Macy's ... Nicely Done!

It was just one employee (click here)!!!!

KPMG audits Macy's ... so are we to believe that Macy's Finance Team / CFO didn't see errors totaling more than a hundred million dollars over multiple years and KPMG didn't see it either? Sure, they may have missed it ... at which point (if true) you should change your line of questioning to be "what value does KPMG actually provide?"

The Reddit accounting message boards find it implausible that this was the act of a lone gunman. It seems unfathomable that Management didn't know about this. Side Story:  In the early 1990s at Lands' End, our owner held a Management Meeting to communicate quarterly results, then promptly (and very publicly) scolded the Finance Team for exchange rate issues regarding our business in Japan. Management knows, folks. Management knows.

In July 2015 Macy's stock traded for $72 as they celebrated their status as "America's Omnichannel Store". It trades for around $16 today.

Retail trade journalists adore Macy's ... they almost act as an affiliate-PR department for the brand. They're promoting the "one-employee" thesis today. "Mistakes were made!!"

They sure were.

There's just a lot of slippery, corrupt behavior out there. Be on the good side of the financial ledger, ok?

I Don't Believe You

All consultants hear this sentence. There are a thousand reasons why the sentence is issued, no time to go into them here,

When you hear this sentence, think carefully whether the person saying it has a point or not.

Facts represent a classic instance where the person saying "I Don't Believe You" loses credibility. For instance, you execute an email A/B test. Your email list has 1,000,000 addresses. You split the list 500,000 for "A", and 500,000 for "B". You learn that "A" performs 12% better. It's going to be hard for the employee to say "I Don't Believe You". If you had 20,000 customers in each group, sure, there's a lot of variability, the employee isn't necessarily wrong. But at 500,000 / 500,000? The employee isn't saying "I Don't Believe You" as much as the employee is saying "I Refuse To Change".

I frequently get feedback that is similar to "I Don't Believe You" in catalog marketing ... it's the "The Catalog Has Intangible Value That You Cannot Measure" refrain, which is just pure nonsense. Think about it this way. Here are catalog results for a comp segment in five-year increments.

• 2004:  $/Book = $4.00. Profit = $0.90.
• 2009:  $/Book = $3.40. Profit = $0.62.
• 2014:  $/Book = $2.80. Profit = $0.34.
• 2019:  $/Book = $2.20. Profit = $0.06.
• 2024:  $/Book = $1.60. Profit = ($0.22).

Those are facts. Worse, the facts point to the end of an era. When somebody tells you that "The Catalog Has Intangible Value That You Cannot Measure", the person is saying "I Refuse To Believe Reality" and is willing to make up a seductive sounding sentence to continue to view the world the way the professional wants to view the world.

We go through these cycles in business all the time ... we don't have facts so we derive fables ... then we obtain facts and many don't like the facts because facts shift power ... so we create different fables to disregard facts and give us peace.

Fortunately in business there is always the profit and loss statement ... you can't suggest that efforts that are not profitable will escape accountability. The p&l statement demands accountability. It's cold. It's ruthless. It's controlled by the people who give you money.

You might not believe the messenger. That doesn't mean the messenger is wrong. Does the person delivering the message possess facts?

Upsets

On Saturday night, long after most of you went to bed, New Mexico scored what would become a game-winning touchdown with twenty-one seconds left while playing ranked Washington State. New Mexico struggles to beat teams like Wyoming, they're not supposed to beat the former Pac12 team from Pullman. And yet, they played a gritty game and came from behind in the second half. They're the reason you play the games.

Aside: If you ever get the chance, take US-195 from Pullman to Lewiston/Clarkston. There's a view of the Snake River from high above the cities that is one of the neatest views you'll ever see.

The best way to describe an upset is that it is a "result that was not supposed to happen" or was "unlikely to happen".

Upsets happen in business all the time. You don't test putting socks on the home page, you just do it on May 18 and it "works" and from there it becomes a "best practice". Six months later, you wonder why conversion rates are down? Maybe it is time to fire the marketing team ... they're generating bad traffic.

Even in a testing environment, upsets happen, all the time. They happen for two reasons.

1. Random Variability.
2. Your Sample Size is Too Small

My favorite sample size error happened awhile back. The analyst would take a segment of maybe 8,000 customers, split it into two groups (7,000 mailed, 1,000 not mailed), then measure results (mailed group = $20.00 average, not-mailed group = $18.40 average), run a statistical significance test, realize the results were not statistically significant, then say "we shouldn't mail this segment because the not-mailed group performed the same as the mailed group and therefore we simply wasted $0.60 sending print to this customer.

Had the analyst split the segment 4,000 mailed and 4,000 not-mailed, the same difference would have been statistically significant, and the analyst would have recommended mailing the audience. The analyst made a mistake, then an apparent "upset" happens, and the analyst costs the brand money because the analyst acts on an upset (no statistical significance) instead of crafting a credible experiment. 

Worse, the analyst made a mistake that had "cascading consequences". Random outcomes would constantly happen because control groups had too few customers, meaning that each of a couple-hundred mailing segments were constantly being flagged as "not profitable", and therefore were not being considered anymore. Had the analyst been given another three years to pursue this approach, the analyst would have gotten the entire department fired - because nobody would have been deemed "mailable" anymore.

Upsets yield all sorts of unusual decision making in the future, in response to the "upset".

How many unusual decisions have you made, or your Management Team made, in response to an "upset" ... a business result that wasn't supposed to happen?

Story Time - About Analysts

Let me tell you a story.

This one is from Lands' End, nearly thirty (30) years ago. I'm 29 years ago and dumb as a box of hammers. Oh, I have the data on my side. The data tells us that if I send 80 pages of Men's Tailored merchandise in a standalone catalog I am heavily cannibalizing the same product (and other products) in my core monthly catalog. If the catalog is forecast to generate $5,000,000 in sales and $750,000 in profit, the reality is that 70% of the $5,000,000 would happen anyway if the catalog was not mailed - it would happen in the core monthly catalog instead. So the $5,000,000 catalog with $750,000 in profit is, in reality, a $1,500,000 catalog that is losing $250,000 of profit.

As a young analytics manager, I hold the moral high ground here (at least that's what I believe). I've tested the results. I have #facts on my side. Any other form of analysis is inferior to the repeated A/B test results which consistently tell the same story, over and over and over again. I'm brilliant, everybody else is an idiot. I'm ready to die on this hill.

One problem. The company moved on. The folks who manage these individual catalogs "won". The CEO who supported integrating the business units was fired, replaced by a person loyal to the individual catalogs. No amount of shoving facts in people's faces is going to matter. None. The issue has been decided.

In the meantime, my Marketing Director hires a Manager from Fingerhut. A very talented woman. Kind. At the end of a meeting we're idly chatting about various topics and I decided to go into a rage about how right I am regarding circulation strategy. I can tell this new hire feels uncomfortable. Hint - if you are a male in a meeting and you are causing a woman to feel uncomfortable, you're doing something wrong.

The new marketing manager looks at me and says "I realize you might be right, but the company moved on, and I simply don't understand why you keep trying to fight a battle you already lost. Worse, the way you argue reflects poorly on you. Why would anybody listen to somebody as angry as you are?"

The fact that I'm sharing this with you twenty-nine years later tells you how much of an impact this woman had on my career. She was right, I was wrong.

If you are an analyst you likely feel as if you are "right". For good reason! You have facts on your side, everybody else has gut feel. You have solid methodology on your side, everybody else leverages faulty methodologies. If somebody else comes to you with "a way" of analyzing something, you're probably quick to point out the flaws in that style of analysis. After all, you are "right" and they are "wrong".

This is where you have to be really careful.

Putting somebody on blast mode because they don't analyze things the way you'd analyze them might feel good, but it doesn't do anything for your credibility. If anything, it just causes the person receiving your feedback to think you are a jerk. You want the opposite to happen - you want the recipient of your message to think you are a genius.

Just because you are "right" doesn't mean you are "Right".

There's a reason I was required to attend Dale Carnegie training around this time in my career. I had to learn how to become a salesperson. I had to convince somebody who wasn't on my side to execute my tactics.

It is difficult to be an analyst, to convince people to do things that work against their instincts. It's hard to be smarter at something than somebody else, only to have "somebody else" question you or recommend tepid ideas that won't work. It's also hard to understand your blind spots. All of us have weaknesses that we simply cannot see, but are obvious to anybody working with us. Learning what we're good at ... that is an important skill ... and then not straying outside of what we're good at ... that's valuable to the companies we work for.

What Reactivation Looks Like by Visit Segment

If you looked at, for instance, 13-18 month 1x buyers (one purchase, last purchase 13-18 months ago), you might find that in the next month this cohort has a 1.1% chance of buying again. That's a percentage that is generally too low to impact your business, consequently, you don't pay much attention here ... other than offering this segment 40% off or 50% off or 60% off ... then you'll tell me that you are being "strategic" by offering discounts.

If you break the data down based on "what" a customer did in the past month, you see a different story.

Turns out that, in this example, thirteen (13) percent of this lapsed segment wasn't actually lapsed at all ... they're interacting with your brand.

Your web analytics package already captures the non-Community  information above ... if you hosted a community forum on your platform, you'd see the 2,026 people who also interacted with your brand. If you have an email address for these customers (which you'd likely have because you'd require these customers to log into your platform with an email address), you'd look at "what" the customer did last month and then send email marketing content that is relevant to the products the customer likely wants to purchase based on community interaction.

It's not hard to do, it's stuff that retailers were doing in the mid-2000s.

So go do something with this information ... right? Get busy!

Why Are You Generally Against Reactivation Via Community?

Maybe you aren't against it, but my metrics suggest you are.

Last week I wrote about Wool& (click here). As you might surmise, when I talk about various topics I put links into the post, and then (unsurprisingly) I measure how often you click on links. For instance, here the Velocity Sellers spend fifty-four minutes telling you how to "crush it on Cyber Monday". Several hundred of you will click on that link, and then a small piece of my soul will turn to omnichannel dust. Thank you.

A total of fourteen (14) of you (quite possibly seven people clicking twice each) clicked on the community links in the Wool& post above.

Knowing that a customer who hasn't purchased from you in anywhere between 3 months and 48 months is suddenly interacting with your brand is ... really, really important. When I measure this stuff via logistic regression response models, an interaction with your brand can vary between a 1.5x increase in reactivation (community) to a 3.5x increase in reactivation (email click through) to a 5x+ increase in reactivation (shopping cart). All you have to do is record this stuff as an attribute in your database - that's it. And then act upon it.

And yet, when I speak of using community as a reactivation tool, you could care less.

Is it the hard work required to perform this work at a functional level?

Is it because your technology team could care less about it and therefore you have no chance to do anything innovative and fun?

Is it because you think I'm just plain wrong?

Send me an email and tell me why you don't do this stuff? (kevinh@minethatdata.com)

eBay

When I worked at Nordstrom, there was an eager and bright professional who worked for one of the catalog co-ops. In modern terms, she'd be called a "Thought Leader". She always had ideas, and she always insinuated that my team and I were ... not smart ... let's leave it at that.

After an hour where she continued to suggest that she was smart and we were just dumb retail employees, I asked her a question.

Kevin:  "Have you ever worked in retail? Brick 'n Mortar?"

Co-Op Professional:  "No"

Kevin:  "Then how could you possibly know how to navigate more than ten thousand employees to get your ideas implemented, and how could you possibly know the intricacies of retail to know if your ideas will actually work or not?"

Yes, there was silence.

From there, I'd use the query often with angry thought leaders who had all the ideas but none of the experience to know if their ideas mattered.

This brings me to eBay.

You already know I enjoy headphones, both open-backed headphones and iems. I've maintained a limit ... six in my collection. When I get to seven, one has to go. I sell the seventh pair on eBay.

eBay is a fabulous place to learn about copywriting, imagery, pricing, and customer service. On eBay, I have a competitor ... as best I can tell when somebody returns a Truthear Nova to Amazon or another brand, that brand sends the returned unit to this guy, who then sells it as an "open box" item on eBay. I've bought a couple of headphones from this guy.

So this guy "sets the market". Maybe the Truthear Nova sells new for $159. If he's selling an open-box version for $95, that's it, that's the ceiling of the market. I've tested selling above his price ... crickets. I've tested selling below his price, and it has to be 20% below ... you list 10% below to 20% below. If you price 20% below you charge shipping. If you price 10% below you absolutely need to offer free shipping.

I take pictures of the headphone or iem, of all of the tips, the box it came in, possibly the new headphone cable that I put on the iem that the buyer will get for free (to set the item apart from other units with stock cables). Pictures matter. They matter more than keywords matter, that's what I've learned.

Good reviews matter. How do I get a good review?

• I put a handwritten note in most outgoing packages.
• I sometimes offer headphone amp recommendations so the user knows what to buy next.
• In the case of the iPad I recently sold, I put a series of connectors (and an Apple Pen) in the box that didn't need to be sent to the buyer. I later learned that a woman bought the iPad for her Dad, and he liked having the bonus items to get started.

The handwritten notes ... that little touch, that matters. I'll tell a story of how I used the item and what I liked about it.

My stuff sells, quickly, usually within a day, normally in 3-5 days. I don't have to pay to have my items promoted.

If you are a service provider (and up to a third of you reading this are) and you want a taste of what your clients go through, and you don't have any direct e-commerce and/or retail experience, sell things on eBay (or Facebook Marketplace). You've got things lying around the house, unloved things ... sell them and test your ideas about pricing, creative, copy, and customer service. You are guaranteed to learn something new and interesting!

Small Apparel Brands Bucking Trends

I talked earlier this week about the feedback many of you provided to me recently ... "apparel is dying". I responded by suggesting this is part of a natural rhythm in business ... brands eventually commoditize an industry (Amazon, Walmart, Target) leaving low prices mega brands and fashion / high priced brands.

Then the middle fills back in with brands that "add something" to make mid-priced merchandise amenable to the customer. I asked you to forward me examples of apparel brands that are smaller, that "add something" to support mid-priced merchandise.

I'll list a few of your recommendations here (there weren't a lot of submissions), then do a deeper dive on one sent in by a reader from a client I've had a relationship with for fifteen years.

• Fair Indigo:  Sustainable, Fairly Made.
• 80s Tees:  Gen-X Pop Culture.
• Lascana
• Creation L
• 32 Bar Blues

Let's spend a few minutes on one brand sent in by an employee of a client I've had a relationship with for fifteen years.

The apparel brand?  Wool& (click here).

The reader cited the marketing hook that makes this brand worthwhile.

• "Wear one of their dresses for 100 days straight and Wool& will give you a $100 gift certificate".

Here is more on the 100 day dress challenge (click here). They suggest that 7,000 customers completed the challenge. Read the criteria for completing the challenge ... you give them your email address, you've already had to have purchased a dress, they encourage you to wear the dress eight hours a day to get the most out of it (100*8 = 8,000 hours, yeah, that's getting some mileage out of the dress). They ask you to promote the challenge on social media ... free marketing! Then you have to email them date-stamped pictures of all one-hundred wearings.

Also notice the "Why 100 Days" quotes.

• The challenge proves that wool is a performance fabric.
• The challenge proves that wool is remarkably odor-resistant.

Finally, there are 413 comments in the post about the 100 day dress challenge. I've talked about the importance of hosting your own community-based forum. Here's one. Every time you log in an participate, they capture information about you that tells them you are interested in them in-between purchases. They may not even use it, but if they worked with me, they'd use it! Who would you rather have on your customer file ... a customer who last purchased 18 months ago that you know nothing about, or a customer who last purchased 18 months ago and interacts with your community?

If 100 days is too long, they offer a 30 day challenge and a $30 gift card. Compromise!

They have community meetups. Twenty-five years ago at Eddie Bauer we had a "field marketing" team ... it was their job to foster what is now called "community". It turns out people want to feel like they are part of something. Who knew?

Here's their Facebook community ... it's private, 25,800 strong. They tell you it is, and I quote, "The Nicest Place on the Internet".

So, yeah, this is what "plus something" looks like. You add all of this and all of a sudden you can get away with mid-priced or even non-fashion expensive-priced items. You're not competing against Target. You carefully define your corner of the world.

I know, I know, this is where you tell me that I'm crazy, and you tell me this is too much work, and you tell me there is no guarantee of success. If that's how you feel, tell me how your call-to-action A/B creative test on Facebook worked, because you're left fighting for customers in a soulless digital landscape, all-the-while being pressured to lower your prices to Amazon / Walmart / Target levels.

You Reacted!

Talk about catalog marketing dying and you'll get feedback, pro and con.

Talk about apparel dying? Overwhelmingly positive feedback, and plenty of it! As much as I've received from a post in a decade.

One of our readers offered an interesting thesis ... "There is a proliferation of $5 million to $10 million apparel brands online ... There is no one place to see them like ... Amazon".

Let's test this thesis. Send me an email (kevinh@minethatdata.com), listing a small apparel brand you shop from. You are also required to tell me what the marketing hook is that they use to give you a reason to purchase from them. If I get enough responses, I'll share your perspectives.

So, please, overwhelm my mailbox with the small apparel brands you are buying from and the "hook" they use to cause you to avoid luxury apparel or commodity apparel. Go!

Apparel (Not All of It) is Dying

Many of my clients sell apparel ... often Women's Apparel.

And many of you are telling me that Apparel is dying.

Some of you don't say it specifically ... you tell me things like "Our sporting goods business is solid but apparel just keeps losing ground". There is some synergy between apparel losing ground and catalog marketing now in a free fall ... both interact with each other in a negative feedback loop.

A decade ago I consulted with a business that ended selling casual apparel (which was a reasonable percentage of the business), favoring outdoor apparel instead. Lots of internal strife ... "this is the end of the brand".

• Narrator:  "It was not the end of the brand."

Sure, the brand got smaller, but then the brand stood for something, and moved forward. Their marketing tactics changed. Their creative treatment of products and personas completely changed. They were free to be "who they wanted to be" because they didn't have to constantly cater to a casual apparel customer that was ... well ... different.

As we ease into 2025, we're at an inflection point if you are an apparel brand. You are being squeezed into oblivion.

• Amazon / Target / Walmart:  They commoditized apparel. Why should I pay $79 for something from Under Armour or Nike when I can get something that is 85% as good from Amazon for $19 and if it fails I can get two more and still have $20 in my pocket?
• Fashion:  Meanwhile, some brands think they can get you to spend $149 on a dress. They can. A "comparable" item might cost $25 on Amazon ... it's not comparable, but it is comparable enough that most traffic heads to $25 while a small fraction spend $149. But it is the "right" traffic for that brand. They are competing on a very different level, and they have to pay for that, don't they? But they made a choice.

So, if you are Lands' End and you have a comparable dress for $89 at 40% off for $54, where do you fit? Why should the customer pay $54 when the customer can pay $25 and save money? Why should the customer pay $54 when the customer can pay $149 and get the ooohs and aaahs from the public? Financial benefits on one end. Social/Emotional benefits on the other end. What does $54 buy you?

One of my favorite books is The Demography of Corporations and Industries. One of the chapters deals with beer. There used to be hundreds/thousands of breweries ... which all were whittled down to a handful of "macro-breweries" by the 1990s. Bud or Miller. Enjoy! If you sold a middling beer at a middling price? Good luck, you were doomed. Only a handful of breweries existed by the mid-1990s.

What happened next? Micro-breweries. Walk down the beer aisle at Safeway in 2024 and you'll see a small area of macro-brews and an extensive array of micro-brews, all generally more expensive than the macro-brews that wiped out the beer industry thirty years ago. Who would have thought that "Summer Shandy" would command a higher price and that people would want beer that tasted like (checks notes) a lemon?

• You have luxury beers.
• You have quirky beers ... the "Summer Shandy's" of the world.
• You have commoditized beers.

When apparel reinvents itself over the next decade, it will likely take the "Summer Shandy" path ... it will be apparel ... plus something ... like beer plus lemon, for instance. Might be quirky, might be different. 

I can't tell you what that "plus something" is ... that's your job, that's what you get paid to do. You don't get paid to send money to Facebook in exchange for customers, a bot can do that.

Apparel isn't the only thing that is dying. Gifts are dying. Home products are dying. Electronics already died years ago (commoditized to Best Buy and Costco and Amazon). I speak often about headphones ... headphones are being re-invented after the market was decimated by Apple and Beats and Noise Cancelling offerings from Bose / Sony / Sennheiser. Go buy a Zero:2 iem for $25 and tell me why you'd buy a Beats headphone for $200 - $300 ever again?

It's your job to find the "plus something" that causes an item to be appealing when compared to "monopoly brands" like Apple, Target, Walmart, Amazon, Best Buy etc. I know, you don't want to hear that, some of you will email me and tell me I'm wrong. That's ok. But you can't fight progress, and if you don't figure it out, somebody else will, at your expense.

Built-In Newness

Some of you keep telling me that "apparel is dying".

It's certainly changing. It's way too easy for me to buy some knockoff brand on Amazon for $19 and have it shipped to me in eighteen hours when I need a pickleball shirt. More on the commoditization of product in an upcoming post.

If you are a member of a wine club, you get to see the myriad benefits of Built-In Newness. Say you belonged to Reininger Winery (click here). They have a subscription service (four shipments per year, twelve bottles per shipment though you can do less/more).

Each year they introduce a new version of Mr. Owl's Red (click here to learn more). There's a new reason to buy a comparable version of a product purchased previously. They have virtual tastings and they leverage social media and email marketing, they text you that your next shipment is coming and you can change quantities. They CALL you if you are a good customer. Yeah, a dedicated sales rep ... just like a B2B brand ... except they aren't a B2B brand. You'll tell me you couldn't "scale" that. You could as part of your loyalty program.

In other words, they build excitement through the "Built-In Newness" of their products.

Now, I get it, you are bored silly with what you sell ... I can tell because in email marketing you literally do not talk about what you sell. Who cares about your Cyber Monday Preview Sale when you print 60% off in a 72 point font while having an 8 point font hyperlink to your "new arrivals"?

You could have an "annual version" of a product ... with modifications from the prior year. Instead of working hard to link sku numbers behind the scenes to maintain "merchandise integrity", have different sku numbers with items that actually have differences year-over-year, and then market the living daylights out of the improvements you made ... just like a winery does when they brag about how the "cold night" impacted grapes.

Use Built-In Newness to your advantage.

Q&A: Reactivation

Here's a short video where I discuss Reactivating Customers. Enjoy!  

https://youtu.be/SG67ge7k1F4

Price / Customer Relationship

There's a reason marketers lust for discounts/promotions.

• More customers purchase when prices are lower.

For many of you, your cost of goods soared in the last three years. You had to make a choice ... do you pass the costs along to your customer, or do you eat the costs?

Almost all of you chose to pass the costs along to the customer.

And the customer responded by saying, "I have a budget".

It's common to see the following.

• Brand increases prices by 20%.
• New/Reactivated customers decrease by 10%.
• Brand thinks the math works for awhile.
• Not enough new/reactivated customers are acquired to fuel future growth.
• Brand observes sales declines in years two/three/four.
• Brand asks "what is wrong with our business?"

There's a reason companies like Macy's eventually gamified purchases to the point where merchandise has no relevance and the brand stands for nothing. At some point in the past, Macy's learned that lower prices = more customers. They got the customers, but lost their soul.

It's a horribly difficult job to not become Macy's, and to not increase prices too much. Regardless, we're paid to balance this relationship.

1%

If you are having a hard time acquiring customers (and many of you are), you are looking at all of your lapsed buyers and you're saying to yourself ... "let's convert THOSE buyers".

Which always leads to the following thought on my end ... "you've had 25 years of e-commerce at your disposal to accomplish that task, so why haven't you already done that?"

The reason you haven't accomplished the task is that it can be really, really hard to accomplish the task. A lapsed customer does not want to be reactivated ... if they wanted to be reactivated, they'd have purchased from you.

The "Life Table" is a methodology tailor-made for understanding "if" a customer can be reactivated. I've been talking about this methodology forever ... this post is from January 2008 comes to mind. I've found that the methodology illustrates a fundamental truth about reactivation.

• If a lapsed customer has a 1% (or better) chance of purchasing in the next month, the lapsed customer "could" be reactivated and therefore deserves marketing attention.

Pretend you have a $100 AOV and 40% of sales flow-through to profit.

• 0.01 * 100 * 0.40 = $0.40 of profit can be generated by this customer.

This means you can attempt to spend money marketing to this customer ... even if you lose some money (say a dime per customer) you can come out ahead on a lifetime value standpoint.

Once the customer dips below a 1% chance of buying in the next month, it's horribly hard to encourage the customer to buy again. That's where essentially free (Social, YouTube) and nearly free (email) efforts take over. 

Above 1% on a monthly basis is where you can think about spending money.

Score every single customer in your database for the annual probability of purchasing again ... a 1%+ monthly rate roughly translates to a 12% - 15%+ annual rate:

• Twelve-Month Buyer 75%+ = Elite.
• Twelve-Month Buyer 60% - 74% = Loyal.
• Twelve-Month Buyer 40% - 59% = Quality.
• Twelve-Month Buyer 20% - 49% = Average.
• Twelve-Month Buyer 1% - 19% = Struggling.
• Lapsed Buyer 15%+ = Lapsed Spend Money.
• Lapsed Buyer 5% - 14% = Lapsed Experiment.
• Lapsed Buyer 0% - 4% = Lapsed Save Money.

Contact me right now for your own, customized scoring process (kevinh@minethatdata.com).

Old School

From 1996 - 2006 a great transition happened.

As e-commerce took hold, customers shifted behavior. Behavior shifted in two ways.

1. Customers who used to call the contact center to place an order with a sales associate instead ordered online. If you ran a contact center back in the day, these were depressing times.
2. Different customers purchased ... customers who didn't focus on old-school channels bought online. They behaved differently, as well.

The latter point was always a fascinating one.

In the early days of e-commerce at Eddie Bauer, we performed demographic studies of who was buying online ... way back then the core customer had shifted from an outdoor enthusiast to a women's apparel buyer (that fact alone transformed the brand in unrecognizable ways) ... but the customer buying online skewed to men, maybe toward technology enthusiasts. They bought from a different portion of our assortment. They didn't interact with our catalog. And most importantly ...

• Their long-term value appeared to be significantly less than the core customer buying from traditional channels.

This pattern, this "old school" pattern of new channels yielding customers with lower long-term value than the core brand repeats over and over again.

• 1994:  New customers purchasing from specialty catalogs (i.e. a Home catalog within an Apparel brand) were worth less than new customers from the core brand.
• 1996 - 2006:  New customers purchasing via e-commerce were worth less than new customers acquired via catalog or stores.
• 2006 - 2011:  New customers acquired via search were worth less than new customers acquired via email or direct load.
• 2011 - 2016:  New customers acquired via social were worth less than new customers acquired via search.

Here we are, late in 2024, and the tradition continues ... it's appearing via new merchandise. When you offer new products, customers in different channels embrace new products/merchandise, with the change in assortment often delivering customers who are less valuable than the core customer buying from the core assortment. On the surface, this analysis suggests to "stick to the basics" ... keep doing what you've always done, keep selling what you've always sold.

And yet ... history tells us the opposite ... that in the short-term, anything new you try is not likely to work, and if it appears to work in the short-term it might not work in the long-term ... and then whatever you do becomes "normal".

Always be willing to be patient with anything "new".

Have You Ever Looked At Performance This Way?

I bring this up annually. But the analysis is so darn much fun!

Take every customer who purchased between Black Friday and Cyber Monday last year, and measure if/when these customers purchase again.

What is fun about this analysis?

You might learn that these are your best customers, and this purchase improves recency/frequency, giving the customers "file power" that fuels sales in January/February/March. I've seen this happen.

You might learn that these customers become dormant until next year's Black Friday / Cyber Monday event. If you learn that, you are blessed ... you don't have to waste marketing dollars on these customers.

You might learn these customers buy all-year, and all you've done is give away $30 of gross margin per customer. You lost money trying to please trade journalists and boutique agency thought leaders.

Regardless, you are going to learn something unique and interesting ... and you'll be able to do something fun in response, making more profit for you business.